The clock is ticking closer to midnight for Chicago's ShoreBank Corp.
The South Shore-based lender, renowned nationally for its support of low-income borrowers, could be closed within days by federal regulators. It has failed to secure a $75 million federal bailout as a follow-up to $145 million it raised in May from Wall Street's biggest players.
(Scott Stewart/Sun-Times)
A source said ShoreBank has control of the private capital only until today, but may announce a deal for a short-term extension of the commitment. The extension could allow the bank a few more days to hunt for additional equity.
ShoreBank has been trying to raise at least $200 million. The federal bailout was a crucial piece, but banking industry experts said the Federal Reserve has been put off by continued declines in the institution's financial condition.
The bank lost $39.6 million the first six months of the year, according to a report it submitted to regulators. In 2009, it lost $119 million.
The report showed ShoreBank being hammered by bad loans to apartment buildings with five or more units. It said it had $103 million in loans to such properties on which no payments are being made.
What regulators call the bank's Tier 1 capital, a measure of its liquid assets, is down to $4.1 million, the report said. The sum was $43.5 million at the end of 2009.
ShoreBank spokesman Brian Berg declined to comment. The bank was founded in 1973 as an answer to other banks' redlining of black neighborhoods and it concentrates its activities on Chicago, Detroit and Cleveland.
Its fate has become a political storm in Washington. ShoreBank has close ties to President Obama, who remembers it from his days as a South Side community organizer and has publicly praised its business model, and to presidential adviser Valerie Jarrett. Conservative critics of the president have charged that Wall Street banks helped out ShoreBank to win favor with him while financial reform was being hashed out.
The White House has denied direct involvement in the ShoreBank matter, saying the president has left decisions to regulators.
The private equity came from Goldman Sachs Group Inc., JPMorgan Chase & Co., Citigroup Inc. and the capital units of General Electric Co., among others.
See this Crain's Chicago video:http://link.brightcove.com/services/player/bcpid30292882001?bctid=424986017001
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